North Little Rock Urban Renewal Agency v. Van Bibber

• Court: Arkansas Supreme Court
• Writing for the Court: JONES; FOGLEMAN
• Citation: North Little Rock Urban Renewal Agency v. Van Bibber, 483 S.W.2d 223, 252 Ark. 1248 (Ark. 1972)
• Decision Date: 24 July 1972
• Docket Number: No. 5--5903,5--5903
• Parties: NORTH LITTLE ROCK URBAN RENEWAL AGENCY et al., Appellants, v. E. E. VAN BIBBER et al., Appellees.

Page 223

483 S.W.2d 223

252 Ark. 1248

NORTH LITTLE ROCK URBAN RENEWAL AGENCY et al., Appellants, v. E. E. VAN BIBBER et al., Appellees.

No. 5--5903.

Supreme Court of Arkansas.

July 24, 1972.

Rehearing Denied Aug. 28, 1972.

Harmon, Wallace & Hilburn, N. Little Rock, Kenneth Coffelt, Little Rock, for appellants.

Patten, Brown & Leslie, Langston & Langston, Little Rock, for appellees.

JONES, Justice.

E. E. Van Bibber was the owner of two lots and a building thereon at the corner of Pike Avenue and 10th Street in the City of North Little Rock. On the first day of November, 1967, he leased there premises to G. D. Nelson for a term of 12 years at a monthly rental of $400. This lease concluded with a clause as follows:

'It is agreed between the parties hereto that this lease is not assignable.'

Nelson went into possession of the premises under his lease and operated a drive-in restaurant business in the building especially designed for such purpose on the property. On or about April 29, 1969, Nelson sold his equipment and the good will of the business to Douglas D. James for $40,000 to be paid $6,000 down and $34,000 in monthly installments of $521.72 each. In connection with this sale a written assignment of the lease from Van Bibber to Nelson was prepared but was never signed by Van Bibber. During the course of the negotiations between Nelson and James, it became apparent that the property might be taken by the North Little Rock Urban Renewal Agency; consequently, they entered into an agreement on May 28, 1969, under which Nelson and James agreed that should the North Little Rock Urban Renewal force the business to be moved from its present location, James should have an option as follows:

'1. To forfeit all monies paid in, let Mr. Nelson deal with the Urban Renewal on satisfying the lease and in return Mr. Nelson would cancel all notes, sales, contracts, bills of sale, etc.

2. Mr. James to deal with Urban Renewal on satisfying the lease and fulfill all obligations under the contract.'

On September 24, 1971, Mr. James gave notice to Mr. Nelson as follows:

'* * * (W)e hereby exercise our option as follows: To deal with Urban Renewal on satisfying the lease and fulfill all obligations under the contract.

In performance and execution of our option, we will continue to make payments on a certain promissory note dated April 29, 1969, in the principal amount of $34,000.00 on which there is a present principal balance due of approximately $25,000.00, according to its terms and conditions until the same is paid in full.'

This litigation originated when on February 16, 1971, Mr. Van Bibber filed suit in the Pulaski County Chancery Court against Nelson, James and the North Little Rock Urban Renewal Agency setting out the lease he had entered into with Nelson and alleging that Nelson had breached his lease contract by assigning it to James without the knowledge and consent of Van Bibber for the sum of $900 per month. Van Bibber alleged that North Little Rock Urban Renewal Agency was threatening to take the property and would do so unless restrained by court order. Van Bibber prayed that the lease between him and Nelson be canceled and that the North Little Rock Urban Renewal Agency be restrained and enjoined from taking the property.

The North Little Rock Urban Renewal Agency filed its answer and counterclaim against Van Bibber seeking a condemnation of the property under right of eminent domain. The counterclaim sought immediate possession of the property and a determination of the damages to which the plaintiff Van Bibber was entitled. By amended answers both Nelson and James asserted leasehold interests under their respective leases and agreements, and they prayed compensation in damages for the taking.

Following trial, the chancellor found that the North Little Rock Urban Renewal Agency had the power of eminent domain and that it was necessary for it to take the property in question. The chancellor found that the fair market value of E. E. Van Bibber's reversionary interest amounted to $101,376.11; that the remaining value of the lease from Van Bibber to Nelson amounted to $28,832.89, entitling Van Bibber to $130,209. The chancellor further found that the separate leasehold interest amounted to $64,264.87, and that James was entitled to the fair market value of this leasehold interest. The chancellor entered a decree directing the Urban Renewal to pay to Van Bibber the aforesaid sum of $130,209 and to James the sum of $64,264.87.

On appeal to this court the North Little Rock Urban Renewal Agency relies on the following points for reversal:

'The trial court erred as a matter of law in ruling that the covenant prohibiting assignment of the lease between Van Bibber and Nelson had not been breached and ruling that condemned property was subject to leasehold interest.

The formula used by the Court in determining the damages to the leasehold was not a proper approach and constituted an error of law. In addition, the amount awarded for the leasehold was not supported by substantial evidence.

The Court erred in allowing the testimony of Jim Hood, Frank Ashcraft, W. H. Pitcock and Jack Farris as expert witnesses.'

G. D. Nelson also appeals from the chancellor's decree and relies on the following point:

'The decree of the trial court in favor of James against Nelson is contrary to both the law and the evidence.'

As to the appellants' first point on breach of the contract by assignment, James contends, and the chancellor found, that the contract between Van Bibber and Nelson simply provided that the lease was nonassignable but did not provide for a cancellation of the lease in the event the lessee attempted to assign it. The appellees further contended, and the chancellor so found, that Van Bibber had ratified that actions of Nelson in assigning the lease or subleasing the property to James. Our decision in Fort Smith Warehouse Co. v. Friedman, 111 Ark. 15, 163 S.W. 175, cited by the appellants is distinguishable on its facts from the case at bar. In Friedman a two year lease contract not only contained a clause providing that the lessee should not assign the lease nor sublet the premises without the written consent of the landlord, it also contained a clause which provided that if the lessee should assign the lease or sublet the premises without the landlord's consent, the landlord might terminate the lease and take possession of the premises without giving any notice in writing to quit. This court in Friedman applied the general rule that:

'where the lease, by its terms, imposes restrictions on the right of a tenant to assign or sublet the premises, and also contains a provision for re-entry and forfeiture of the lease by the landlord, upon breach of these covenants the landlord may declare the lease terminated and take possession of the premises.'

We are unable to say that the chancellor's findings on these points are against the preponderance of the evidence.

In the case at bar James was actually paying to Nelson the agreed monthly payments of $521.72 on the purchase price of the equipment and good will of the business, and in addition he was paying to Nelson the $400 per month which Nelson was obligated to pay to Van Bibber as rent. The record indicates that on at least two or three occasions Van Bibber found James in complete control of the business; he was completely satisfied with James' operation of the business and he also received and accepted the $400 rental directly from James for at least a period of a few months prior to the commencement of this action. See Purnell v. Atkinson, 248 Ark. 401, 451 S.W.2d 734; Corning Roller Mills v. William Kelly Co., 159 Ark. 1, 250 S.W. 895. We cannot say that the chancellor's finding that an assignment of the lease had been made to James by Nelson and ratified by Van Bibber is clearly against the preponderance of the evidence. Our conclusion on this point also disposes of the appellants' argument that the chancellor erred in ruling that the condemned property was subject to a leasehold interest. We, of course, have held that a lessee of condemned property is entitled to damages for the value of his leasehold interest separate and apart from the lessor's reversionary interest. Ark. State Highway Comm'n v. Polk, 250 Ark. 377, 465 S.W.2d 671.

Urban renewal argues that the formula used in determining the damages to the leasehold in this case was not a proper approach and constituted an error of law. It argues that the amount awarded was not supported by substantial evidence and it cites Ark. State Highway Comm'n v. Fox, 230 Ark. 287, 322 S.W.2d 81, and Hot Spring County v. Crawford, 229 Ark. 518, 316 S.W.2d 834, in support of this argument. In the Fox case the lessee's monthly average sale...